Kenneth Andrade’s Old Bridge Capital Management Pvt Ltd has written to Securities and Exchange Board of India (Sebi), accusing Shapoorji Pallonji group of concealing material information in the initial public offering (IPO) or red herring prospectus of its subsidiary Sterling and Wilson Solar Ltd (SWSL). The Sebi-registered portfolio manager also accused SWSL's board of “misuse of powers” in granting extension of time to promoters for repayment of loan out of proceeds for Offer for Sale.
The complaint by Andrade, a respected fund manager, is the second instance in recent weeks that the SP Group has come under the glare of key market players. Last week, a report by InGovern , a leading proxy advisory firm for minority shareholders, alleged the promoters had siphoned off funds raised from the IPO.
Investors in the Sterling and Wilson Solar IPO have already lost significantly with the company's shares losing 60 percent of its issue price. The company got listed on August 20, 2019. Old Bridge Capital’s alternate investment fund was one of the investors in SWSL IPO.
“In this matter we would like to draw your attention to the fact that the amount received from the proceeds of Offer for Sale has not been utilized for full repayment of loan due to SWSL and Starling and Wilson International Solar FZCO as against the ‘Objects’ of the Offer for full repayment within 90 days,” it said in a letter to Sebi.
Sterling & Wilson through its IPO had raised Rs 2,850 crore via an offer for sale or OFS route. Out of Rs 2,850 crore raised, it stated that promoters will repay loans amounting to Rs 2,563 crore to Sterling & Wilson Solar within 90 days of listing.
However, promoters Shapoorji Palonji Company and Khurshed Daruwala have only paid Rs 1,000 crore as of December 31, 2019, which is 133 days after listing.
“Out of the balance dues, consisting of principal and interest, the promoters have enabled repayment of Rs 1,000 crore... The Outstanding Loan of Rs 2,563 crore due from Sterling and Wilson Pvt. Ltd. and Sterling and Wilson International FZE as on the date of listing of the company's shares on the Exchanges stands reduced to Rs 1,644 crore," it had said in a regulatory filing on December 31, 2019.
Old Bridge Capital Management said the amount of Rs 2,850 crore received from proceeds of sale should not have been used for any other purpose.
“We refer to the letter date November 14, 2019 filed with exchanges by SWSL, the Board of Directors of the Company approved request received from the Promoters for revised repayment schedule for the balance outstanding loan amount. It is pertinent to note that the amount of Rs 2850 crores received from proceeds of Sale was available and should not have been used for any other purpose,” the letter to Sebi said.
Promoters of Sterling and Wilson still owe the company Rs 1,644 crore for which they have sought a phased repayment schedule.
The letter also said that there was no reference in RHP with respect to extension of timelines and change in repayment schedule in case the collections from the offer of sale is lower.
The portfolio fund managers have asked the Sebi to act against all parties involved in OFS, including the company, promoters and merchant bankers, which includes ICICI Securities, Axis Capital, Credit Suisse Securities India, SBI Capital Markets and IIFL Holdings among others, for non-disclosure of information and concealing of facts as well as improper due diligence.
The delay in payment after the company’s promoters sought more time from the board on November 15 to repay loans sparked sharp selling with the scrip tanking by 20 percent.
In its report, the InGovern accused the SP Group of committing an act of fraud on the shareholders. It asked the Sebi to force promoters of Sterling & Wilson to provide an exit offer to minority shareholders of the company.
